Sri Lanka undercapitalized small insurers to be hurt by flood claims: Fitch
ECONOMYNEXT – Claims from a May 2016 floods in Sri Lanka is manageable for the sector but small insurers who were already undercapitalized will be hurt, Fitch, a rating agency has aid.
According to Sri Lanka’s insurance regulator, for small general insurers which go 9 percent of gross written premiums in 2015 failed to meet regulatory minimum under the solvency ratio enforced until 2015.
Sri Lanka moved to risk-based capital from 2016.
"The capitalisation of some lower-capitalised insurers could also be affected by lower profitability stemming from flood-related claims," the rating agency said.
"Fitch expects weaker profitability, driven by intense competition, especially in motor, to threaten the capitalisation of some lower-capitalised insurers."
However flood cover had been re-insured abroad the rating agency said.
Intense competition was making smaller insurers exit the general insurance and focus on life insurance.
The risk-based capital regime is expected to promote risk-management. Minimum capital had been raised to 500 million rupees from 100 million.
Fitch said several firms were expected to list in 2016 and 2017 under regulatory requirements and three firms were yet to split their general and life businesses. (Colombo/July08/2016)